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Jan 9, 2015

For five years now, I have been writing stories based on consultants and analysts projections of what kind of raises businesses are planning to give employees in the coming year.

And for five years, I have been reading these salary surveys and writing the same thing: raises next year will be about 3 percent.

Yes, one of the defining characteristics of our mediocre economic recovery has been the miserly increase in employee pay even as businesses recovered and recorded record profits.

Raises averaged only 1.7% last year

Even today, the monthly unemployment report from the Labor Department reports that the average pay increase last year was just 1.7 percent.

That’s why two of the findings in Glassdoor’s latest U.S. Employment Confidence Survey startled me. According to the Glassdoor report:

  1. Half (49 percent) of employees expect their next raise to be between 3-5 percent; and,
  2. More than a third (35 percent) of employees says they will look for a new job if they do not receive a pay raise in 2015.

A 3 to 5 percent pay hike isn’t unreasonable by any means, but given that raises were expected to be around 3 percent in 2014 and (according to Labor Department) really only averaged 1.7 percent, is an expectation of a 3-5 percent hike this year very realistic?

I think you know the answer to that.

48% are confident they can find another job

Frequent TLNT contributor Tim Sackett pulled out a couple of other interesting findings from the Glassdoor survey:

  • (Half) 48 percent of your employees are confident they can find another job if they need to (the highest in six years); and,
  • (Only) 13 percent fear they will be laid off (the lowest in six years).

I hate to be the bearer of bad news, but all of this puts American employers AND employees in a tough spot. Here’s how The New York Times put it:

The good news is that in 2014, people were increasingly finding jobs,” said Elise Gould, a senior economist for the Economic Policy Institute, in a statement. “The bad news is that we are still digging our way out the recession, and wage growth remains stagnant and untouched by recovery.”

The rub in all of this is that employees expect a decent (and that’s the best way to describe a 3-5 percent) raise this year, and are pretty confident they can find another job if they don’t get it. Economists however believe that the unemployment rate needs to drop a lot lower before there is enough real pressure on employers to actually give decent raises.

It’s “The Year of Living Dangerously”

Here’s how one economist described it in The Washington Post:

I think the unemployment rate might have to go down to the low 5s before we start to see some upward pressure on wages,” said Alan MacEachin, an economist at the Navy Federal Credit Union. “There are still too many folks out there that are willing to grab the jobs that are available.”

So, what does this all mean? To me, it means that 2015 is probably ‘The Year of Living Dangerously.” It’s dangerous because:

  • Workers expect a decent pay increase this year, and many feel they can find a new job if they don’t get it — and a good chunk say they plan to do just that if employers don’t ante up.
  • Employers are coming off a year where they were able to give workers less than a 2 percent salary bump despite the improving economy and record profits.

Which side will buckle first?

Something has to give, but I don’t think it is going to be employers handing out bigger raises. For that to happen, employees need to show a real willingness to pick up and go find a new job, as the Glassdoor survey says they are willing to do.

It’s a Mexican standoff, as they say in my part of the world. Which side will give in first?

My view is that it all comes down to the employees. Until they are ready to walk, a 5 percent pay hike is nothing but a pipe dream.

It takes a poker player to get a raise

Of course, there’s more than just a new employee confidence survey in the news this week. Here are some HR and workplace-related items you may have missed. This is TLNT’s weekly round-up of news, trends, and insights from the world of talent management. I do it so you don’t have to.

  • What does Intel mean by “full representation” in their workforce? Silicon Valley tech companies have been under fire for their terrible diversity numbers, and Intel this week pledged to fix the problem and “reach full representation at all levels of our company’s workforce by 2020.” But The Washington Post questioned just what “full representation” really means. “The company’s press release said, “full representation means Intel’s U.S. workforce will be more representative of the talent available in America.” When asked to further explain that, the company provided the Post with this translation: Intel’s goal is to reflect the number of women and minorities who have the skills to take on jobs at Intel. Now, that’s quite a different goal.”
  • Does raising the minimum wage help or hurt the economy? A good 40 percent (20) of the states increased their minimum wage on January 1, but this increase or decrease the potential for the federal minimum wage to increase as well? This story from NPR wades into the debate.
  • Want a raise? You need to think like a poker player. The Atlanta Journal-Constitution had this interesting article that dug into how poker skills can help you in salary negotiations. It said, “There are a lot of lessons you can learn from poker that will help you thrive personally and professionally. Rather than have you put money on the line to learn them, we decided it made more sense to ask experienced poker players to share the most valuable things they’ve learned from the game and apply them to something most people experience but many don’t enjoy doing: salary negotiation.”
  • Yahoo and the forced (or stack) ranking debate. Former General Electric CEO Jack Welch was the most famous proponent of forced ranking of employees, but now Marissa Mayer at Yahoo has embraced the practice. The Harvard Business Review gets into what she got right, and wrong, with this controversial performance management practice. It closes by saying, “In the case of Yahoo, the benefits of stack ranking may have outweighed its negatives, at least in the short term. Now that Mayer has been Yahoo’s CEO for nearly two-and-a-half years and has had time to build relationships and trust with the rest of the organization, the time may be right to phase out stack ranking, and start adopting a more productive approach.”